One type of insurance coverage offered in addition to all the other types is umbrella insurance.

Like a real umbrella, this type of insurance is intended to cast a wide net over the various risks in your life to protect you once your other insurance policies run out.

What is Umbrella Insurance?

But, how does this coverage work? And what is it anyway?

To put it simply, umbrella insurance is extra liability insurance designed to protect you from lawsuits or major claims that could be costly in financial terms.

Umbrella insurance typically provides coverage over and above the limits on other insurance policies with the goal of providing an excess source of coverage to draw from in the worst-case scenario.

Umbrella insurance can also be relied upon to cover claims that may not be covered under other liabilities policies.

What Does an Umbrella Policy Cover?

It may sound strange to purchase additional insurance coverage that kicks in once your current policies are exhausted, but it can make a lot of sense once you break down what exactly umbrella insurance is used for.

For the most part, umbrella insurance is intended to cover several situations that can be extremely costly under the right circumstances — for example: injuries, damage to property, lawsuits or litigation, and personal liability situations.

Here are some scenarios that fit with each example:

Injuries: Imagine a neighbor’s child climbs a tree in your backyard and falls to the ground, breaking his neck in the process. If the parents sue you, your umbrella policy could kick in for amounts which aren’t covered under your homeowner’s insurance policy.

Damage to property: Your child causes considerable damage to pricey antiques in a neighbor’s home. The neighbor sues you for the estimated cost of replacing these antiques, which just so happens to be exorbitant.

Lawsuits or litigation: A colleague in your industry is unhappy with your critique of their business practices online, so they decide to sue you for libel.

Other situations where an umbrella policy could prove extremely helpful include slander or someone suing you for mental anguish resulting from you or a family member’s actions.

A quality umbrella insurance policy is also essential to protect you from the results of false arrest or imprisonment.

Umbrella Insurance in Action

Consider this example of how an umbrella insurance policy might work in real life:

Imagine you’re driving your own vehicle when you get into an accident that’s entirely your fault.

What Isn’t Covered with an Umbrella Policy?

Other types of insurance are provided to cover your personal belongings and assets, including auto insurance and homeowner’s insurance.

Umbrella policies also fail to protect individuals and businesses in situations where they have committed a fraudulent act or a crime.

If you are being sued because you defrauded someone out of their assets somehow, for example, your umbrella policy will not back you up.

Do You Need Umbrella Insurance?

Before you decide whether to purchase an umbrella insurance policy, it helps to take a holistic look at your finances and your assets.

Chances are good that, if you have considerable wealth, you have more to protect than someone who doesn’t have much to their name.

Still, it’s important to remember that you can be sued for all kinds of reasons — even if you don’t considerable wealth.

For that reason, many experts suggest getting umbrella insurance quotes and purchasing a basic policy no matter your net worth.

Here are a few surefire signs you need an umbrella policy:

You own and home and drive a car, or your family members drive cars.

You have kids or teenagers in the home, including young drivers.

You are perceived as someone who has a lot of money, whether it’s true or not.

You own items that present an extra level of risk, such as a backyard pool or hot tub, a trampoline for the kids to play on, a snowmobile, or a four-wheeler.

You worry that the limits on other insurance policies you own are not high enough to protect you from financial losses.

You have considerable assets to protect.

How to Find the Right Umbrella Insurance Policy

It is easier than ever to shop and compare policies online.

After applying for several umbrella insurance quotes, you can take some time to compare policies as well as costs.

Ideally, you’ll want to look for a high-quality umbrella insurance policy from an insurance company with excellent ratings.

You’ll also want to compare the costs of each policy along with the level of coverage being offered and try to buy the most amount of coverage you can for a price you can afford.

Fortunately, umbrella insurance is usually not very expensive.

The average personal umbrella insurance policy can cost as little as a few hundred dollars per year for up to $1 million in coverage.

Since umbrella insurance kicks in after your other insurance policies are exhausted or in rare personal liability situations, it tends to come with a lower level of risk for insurers, which translates into lower costs for you, the consumer.

Bottom Line

If you’re leaning toward picking up an umbrella policy, you shouldn’t delay the purchase.

The sooner you line up umbrella insurance, the sooner you can rest easy and quit worrying about life’s many “what ifs.”

You’ve taken the time to read this article and learn about this important type of insurance coverage, but now is the time to act!

Contact us to get umbrella insurance quotes today and you may be able to buy coverage in less time than you think.

About Jeff Root

Jeff Root is the owner of Rootfin. He is an independent life insurance agent, licensed in all 50 states & the District of Columbia. Jeff is an accomplished author, speaker at industry-leading insurance conferences around the US, and has helped 1,000's of people purchase insurance online and over the phone.

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